The present invention generally relates to the field of managing the disposition of delinquent accounts (i.e., bad debt) and, more particularly evaluating a collection of delinquent accounts by subdividing this collection into a plurality of groups and making the disposition decision on a group-by-group basis.
Significant amounts of credit are being extended to consumers each year in the form of the issuance of credit or other types of charge cards. One significant problem with the extension of credit is delinquency in the payment on accrued balances. A number of courses of action are typically employed for delinquent credit or other charge card accounts. Delinquent accounts may be sent to a collection agency where the creditor of the delinquent account will typically receive a percentage of the amount ultimately collected by the collection agency. Another avenue which may be pursued by a creditor of a delinquent account is to sell the delinquent account to a third party for a stated price who will then attempt to collect on the delinquent account. Typically a creditor will receive a bid for the sale of all delinquent accounts within a certain category or the like. For instance, a creditor may receive a bid for all delinquent charge accounts within a certain industry or group of industries. A creditor may also receive a bid for all delinquent charge accounts which were issued by a common entity or group of entities.
One way in which bids of the above-described type have been previously evaluated is to refer back to a historical database which contains information about payments which were received on accounts after they became delinquent. Information is retained on how each particular delinquent charge account recovered, or stated another way the payment profile of these delinquent accounts (i.e., the amount and timing of payments after the accounts are xe2x80x9cdeclaredxe2x80x9d delinquent). This historical information is used as follows and may be illustrated by an example where a bid has been made to purchase all current delinquent accounts issued by Company xe2x80x9cAxe2x80x9d. A single liquidation or payment profile is generated from all of the historical data which has been retained on the delinquent accounts issued by Company xe2x80x9cAxe2x80x9d in relation to their recovery. From this single liquidation profile and based upon certain other assumptions in relation to the currently delinquent accounts for which a bid has been received, the average net present value of the plurality of currently delinquent accounts for which a bid has been received is calculated. The bid price is compared to this net present value, and the decision is made as to whether the bid should be accepted.
One problem with the above approach is that there may be significant variance of sorts within all of the currently delinquent accounts for which a bid has been received. Some of these currently delinquent accounts may be desirable to sell for the subject bid price, while others may be desirable to retain in some manner (e.g., to continue to hold and receive payments thereon, to send to collections). Thus, there is a need for a system and method which makes disposition decisions based upon splitting a predefined collection of delinquent accounts into a plurality of groups for independent analysis, and thereafter deciding how to deal with these delinquent accounts on a group-by-group basis.
This disclosure generally relates to managing the disposition of delinquent accounts or the like. For instance, this disclosure allows for a determination as to whether certain delinquent credit card accounts should be sold for an offered price, or whether at least some should be retained in some manner for collections by a third-party collection agency or an xe2x80x9cinternalxe2x80x9d collection agency.
One aspect of this disclosure relates to managing a collection of currently delinquent accounts, such as by making a recommendation for disposition of such delinquent accounts. As such, this xe2x80x9ccollectionxe2x80x9d will hereafter be referred to as a xe2x80x9ccurrent portfolio,xe2x80x9d and its respective delinquent accounts will hereafter be referred to as xe2x80x9ccurrent delinquent accounts.xe2x80x9d Broadly stated, the current portfolio is divided up into a plurality of groups. Each of these groups is then independently analyzed to make a value determination on a group-by-group basis. For instance, the xe2x80x9cvalue determinationxe2x80x9d may be at least reflective of an average amount which an issuer of the delinquent account may expect to receive in relation to each delinquent account within a particular group. Based on this evaluation, each of the groups may be dispositioned in at least some manner (i.e., all delinquent accounts within a particular group are dispositioned in the same manner). Representative xe2x80x9cdispositionsxe2x80x9d include selling all delinquent accounts within a particular group for an agreed-upon price, as well as retaining all delinquent accounts within a particular group to collect in some manner on future payments made in relation thereto. Payments may be received in a variety of manners. For instance, the issuer could just wait for the holder of the delinquent account to make payments directly to the issuer of the delinquent account. More commonly the issuer of the delinquent account will transfer the particular current delinquent accounts to collections, where the issuer will only receive a percentage of the payments made by each holder of each current delinquent account. xe2x80x9cCollectionsxe2x80x9d may be affected externally (i.e., by a party which is not affiliated with the issuer of the delinquent account, or stated another way by a third-party collection agency) or internally (by an entity of sorts which is affiliated with the issuer of the delinquent account, such as a department or division of a company which is responsible for collections).
Various refinements exist of the features noted in relation to this disclosure. Further features may also be incorporated in this disclosure as well. These refinements and additional features may exist individually or in any combination. Each delinquent account may be xe2x80x9cscoredxe2x80x9d, and the xe2x80x9cscorexe2x80x9d of a particular current delinquent account may be reflective of a payment which would be projected to be received in relation to this particular delinquent account, based upon a statistical analysis of sorts. These xe2x80x9cscoresxe2x80x9d may be used to assign each of the current delinquent accounts to one of the plurality of groups, with each group having its own score range.
Historical data may be retained on accounts which were at least at one time xe2x80x9cdelinquentxe2x80x9d, and for which at least certain payments have been made in relation thereto. These previously delinquent charges will hereafter be referred to as xe2x80x9chistorical delinquent accounts,xe2x80x9d and a collection of these historical delinquent accounts will hereafter be referred to as a xe2x80x9chistorical portfolio.xe2x80x9d This historical data may be used in the dispositioning decision in relation to each group of current delinquent accounts. In this regard, the historical portfolio may be divided up into a plurality of groups. One way to define the plurality of groups is to score each of the historical delinquent accounts in the above-described manner, to divide this historical portfolio up into a plurality of groups (e.g., a predetermined number of groups), and to note the high and low score in each group of the historical portfolio to define a plurality of score ranges or clusters. These same score ranges or clusters may then be used to establish the above-noted groupings for the current portfolio.
Further refinements may be used to define the groups based upon the above-noted scoring. Groupings may be established by requesting that there be a certain number of score groups within each of the historical portfolios, and that there be an equal number of delinquent accounts in each of the score groups of the historical portfolio. Once the groupings are established in this manner, the minimum and maximum score in each group of the historical portfolio may be noted to define the score range for each such group. Identification of the group with which a particular current delinquent account should be associated may then entail scoring such current delinquent account, and then associating such current delinquent charge account with a group of other current delinquent accounts which also have a score within a score range associated with the group.
Each of the groups of the historical portfolio may have a liquidation profile associated therewith. This liquidation profile may be based upon amounts (i.e., monetary payments) which were actually received by the issuer in relation to each of the historical delinquent accounts over a certain period of time (e.g., payments received via sending the historical delinquent accounts to collections). The liquidation profile for a particular group in the historical portfolio would thereby be the average for all of the historical delinquent accounts within the subject group. In the event that a bid has been received for the current delinquent accounts, these liquidation profiles of the groups within the historical portfolio may be used to establish the net present value which may be associated with each particular group of the current delinquent portfolio for comparison with the bid price. If the average net present value of the current delinquent charge accounts within a particular group exceeds the bid price, the prudent disposition decision would be for the current delinquent accounts within this particular group to be retained by the issuer for receipt of payments in relation thereto in the manner which was used to define the subject liquidation profile. Conversely, if the bid price exceeds the net present value of the current delinquent accounts within a particular group, the prudent disposition decision would be for the current delinquent accounts within the particular group to be sold for the bid price. It should be appreciated that the noted liquidation profiles may be used to make the disposition decision regardless of the format of the xe2x80x9cbidxe2x80x9d which has been received (i.e., the liquidation profile may be defined via using third party collection agencies, and the xe2x80x9cbidxe2x80x9d may be the amount which would be expected to be received using an internal collection agency).
Common practice in the debt management industry is for a third party to offer to purchase a certain type of current delinquent accounts, such as all current delinquent accounts having a common issuer or within a common field or industry. The present invention may be used to determine which, if any, of the current delinquent accounts should be sold, and which, if any, of the current delinquent accounts which are the subject of the bid should be retained to collect in some manner upon future monetary payments made in relation thereto. For instance, the disposition decision may be to sell all delinquent accounts having a score less than a certain amount, and to retain all other delinquent accounts for receipt of payments made in relation thereto.